This is creating not only economic but political incentives for greater Asian integration. Among the member states of ASEAN, there is clear recognition that they need to organize themselves into becoming a strong partner and counterweight to China. In turn, China itself is recognizing that it needs to "share" some of the benefits of its economic growth with its neighbors; that the prerequisite for political stability and economic prosperity for the entire region is Chinese magnanimity, realizing that its growth has to benefit Asia as a whole and not only China. This is why China has initiated negotiations for a free trade agreement with, the ten ASEAN countries at first and then India.

There are two odd partners in this scheme: Japan and Australia. Japan has seen its political and economic leadership in Asia slipping away in favor of a new economic order driven by China and India. However, Japanese industry cannot survive with a sullen Japan as partner. It needs to maintain its place inside this ongoing process of integration to avoid relegation in the supply chain. This explains why the chairman of the Japanese Business Federation paid a visit to Hu Jintao, bypassing his own prime minister in the process.

Australia faces the dilemma of coming to grips with the awkward question whether it belongs to Asia or not. Analyzing the trade statistics reveals strong Australian dependence on northeast Asia, less so on Southeast Asia--and an Australia left outside an integrated Asia would spell doom for many of Australia's primary industries.

The wooden nickel in all this is the U.S. attitude. The United States has not--apparently--made up its mind whether it wants to bless Asian integration or throw a spanner into the works. Politically, of course, a stronger Asia could also act as a counterbalance to the United States. Economically, it makes sense for the United States to further Asian integration as a way to maintain momentum for global growth. Measured in purchasing power parities, China and India account for 80 percent of the U.S. gross national product. Add in Japan, Korea and Southeast Asia, and you get approximately 125 percent. This allows the United States to "share" responsibility for keeping the global economy on track with the rising economies of Asia. The alternative in the form of global recession is, frankly speaking, not attractive.

Jorgen Orstrom Moller
Visiting Senior Research
Fellow, Institute of Southeast Asian Studies
Singapore

Adjunct Professor,
Copenhagen Business School
Copenhagen, Denmark